Source: The Wall Street Journal
By Ben Eisen
June 23, 2020
More than 100 members of Congress are calling on the Trump administration and the Federal Reserve to help struggling businesses pause debt payments in a key real-estate financing market.
Many of the hotels, shopping malls and office buildings that borrow money in the roughly $550 billion market for commercial-mortgage-backed securities said they have been unable to negotiate debt reprieves during the coronavirus pandemic. Some are worried they could lose their properties to foreclosure, The Wall Street Journal reported this month.
The troubles stand in contrast to other types of debt such as home mortgages, where borrowers have been able to pause payments for as much as a year as part of the more than $2 trillion stimulus package signed in March.
The bipartisan group of representatives, led by Rep. Van Taylor (R., Texas), expects to deliver a letter to Treasury Secretary Steven Mnuchin and Fed Chairman Jerome Powell on Tuesday asking them to set up a lending facility to support these borrowers through the current stretch.
“Without a long-term relief plan in the face of an elongated crisis, CMBS borrowers could face a historic wave of foreclosures starting this fall, impacting local communities and destroying jobs for Americans across the country,” they said in the letter.
Mr. Mnuchin has acknowledged the problem previously. He said during a Senate hearing last month that “this is a technical issue and we may need to come back to Congress to work with you on a technical fix,” though he didn’t offer a specific solution.
Some 7.15% of CMBS loans were 30 or more days delinquent at the end of May, including 19% of hotel loans and 10% of retail loans, according to data from Trepp.
At issue is the rigid structure of this market, which wasn’t designed to provide borrowers with temporary payment relief. Those who need to pause payments must work with “special servicers,” which are hired to negotiate on behalf of the bondholders that own the loans.